So just exactly how many orders of US soybeans have Chinese
There has been no confirmation yet that Chinese importers
have indeed ditched purchases from the US, switching their spending to Brazil,
whose new crop shipments are now beginning in earnest now that the harvest is
approaching second gear.
That said, some insight may come later on Thursday when the
US Department of Agriculture unveils weekly export sales data.
"Trade is looking for cancellations in the weekly export
sales, and a distinct possibly of net negative old crop sales," meaning
cancellations exceed new orders, Kim Rugel at Benson Quinn Commodities said.
"The Brazilian producer has become an active seller in
recent days with harvest now picking up steam and a weaker real currency
supporting domestic values."
'Rumours of soybean
In fact, there was an unusually close consensus for
estimates of the ditched orders. Does this make the talk more likely to be
CHS Hedging noted talk "throughout the trade that China has
cancelled 10-15m bushels (272,000-408,000 tonnes) of US Gulf soybean shipments."
Another US broker highlighted "rumours that China called off 300,000-400,000 tonnes of U.S.
At Commonwealth Bank of Australia, Luke Mathews said that "there
is market talk that up to 400,000 tonnes of US soybean sales to China have been
switched to South American origin".
The rumours even reached Singapore, where Vanessa Tan at
Phillip Futures noted "rumours of soybean cancellations by China of up to six
cargoes", or potentially about 300,000 tonnes.
Whatever, the picture was hardly improved by the prospect on
Friday of the start of China's lunar new year festivities, the country being the
top importer of soybeans, besides of some other agricultural commodities such
as cotton and rubber too.
"The Chinese Spring Festival starts on Friday and continues
for about 23 days. During this time many
business and government offices will be closed," Ms Tan said.
"The slowdown in activity could mean a lack of fresh soybean
And when China does come back, there is of course the idea
that buyers will turn to Brazil for supplies rather than the US.
"The early soybean harvest in Brazil has been met with good
yields and is allowing earlier than normal exports as vessels begin to load at
the port of Paranagua," CHS said, also flagging ideas of a potential Argentine export
tax, as reported by Agrimoney.com, encouraging sales there too.
Ms Tan said: "In Brazil, it is likely that the already
record-large soybeans crop harvest is expanding.
"The top soybean-growing region in Brazil, Mato Grosso, is
experiencing strong yields."
Chicago soybeans for March dropped 0.4% to $12.63 ¾ a bushel
as of 09:15 UK time (03:15 Chicago time), although that could well change
depending on the weekly US export sales data later, expected to come in at 750,000-1.05m
'Searching for value'
These statistics will be closely watched for wheat too,
given less strong rumours of order cancellations, and with ideas of strong
demand potentially able to stem the tide of selling in the grain.
Wheat markets "are back to searching for value, which
requires additional export demand," Benson Quinn Commodities said.
Today's weekly export sales, "which are pegged 350,000-
550,000 tonnes, are not expected to do the trick in a market that the trade
believes can invite more demand".
'Much of the news has
In fact, the extent of the downturn in wheat prices has
puzzled many analysts.
"Much of the news in recent weeks has been supportive, ie US
freezes and improved demand, yet futures markets continue to break to fresh
contract lows," CBA's Luke Mathews said.
Indeed, analyst Dave Hightower, on Wednesday forecast a
bottom in the Chicago wheat market at $5.40-5.60 a bushel, not too far below
current levels, while seeing corn prices potentially dropping to $3.60-3.85 a
Furthermore, the last session's tumble of more than 2% in
wheat futures meant that "market are once again oversold", meaning that "potential
sellers may approach the winter wheat markets with a little more caution",
Benson Quinn Commodities said.
'Downtrend isn't over'
That said, "Wednesday's new lows and the fact that technical
studies barely have a pulse indicate that the downtrend isn't over", the broker
And another negative for now is that the freeze in the US is
"Cold temperatures have given way to more moderate
temperatures, alleviating recent talk of winterkill," CHS said.
Wheat rebounded in early deals, but recovered only a portion
of ground lost in the last session, adding 0.5% to $5.54 ½ a bushel in Chicago for
Still, that allowed wheat to recover a little of the $0.10 a
bushel in premium it lost in the last session over corn, which has proven more resilient thanks to ideas of firm
demand – US exports are competitive on the world stage – and a reluctance by
growers to sell.
Farmgate corn selling on Wednesday was "limited, unless
driven by on farm quality issues", CHS said.
Still, many analysts believe the grain will nonetheless
succumb eventually to the huge US inventories, with Mr Hightower forecasting a price
low at $3.60-3.85 a bushel.
March corn was 0.2% higher at $4.28 ¼ a bushel, fighting a
battle to stay ahead of its 10-day and 50-day moving averages.
US weekly export sales data later are expected at 550,000-750,000
'Oversupply in the
Among soft commodities, raw
sugar, which like wheat closed the last session at its lowest since 2010,
managed some bounce, up 0.4% at 14.81 cents a pound on New York's ICE market,
but was this only profit-taking on short positions?
Phillip Futures restated a "bearish" outlook on sugar, based
on both technical factors and an idea that prices will continue "to be
pressured on the oversupply in the market".
CBA's Luke Mathews said that "in addition to the comfortable
supply situation, currency movements continue to have a significant impact on
ICE sugar futures", and in particular, the weakness in the real, with Brazil
being the top sugar producer and exporter.
"Over the past fortnight ICE sugar prices have fallen 4 5%
in dollar terms but are largely flat in real terms."